Leveraged debt issuance in Europe was up 26% year-on-year (YoY) in 2025 according to a recent Association for Financial Markets in Europe (AFME) report, reaching €445.8 billion, but slowed towards the end of the year.
In Q4, the €98 billion issued represented a 2.7% quarter-on-quarter (QoQ) drop and a 21.4% YoY decline. Over the quarter, only high yield (HY) issuance increased QoQ – leverage loans remained static, while direct lending fell by 9%.
AFME notes that issuance of collateralised loan obligations (CLOs) was at its highest since 2008 in 2025, reaching €60.5 billion. A quarterly decline of 14.6% was seen in Q4, but a 6.9% increase YoY. Outstanding CLO now sits at €303 billion in Europe.
A total €148.8 billion was issued in primary HY bonds last year, with 81.7% generated in European developed markets and 18.3% in European emerging markets.
In the last quarter of the year, 59.8% of issuance was used for refinancing. This has been a popular use of proceeds over the year, particularly in Q2.
Spreads peaked in April and tightened towards the end of the year, closing 2025 at 2.7%. The total outstanding in HY is now €735 billion.
Default rates increased over the year, with S&P recording a 0.33 percentage point increase to 4% over the quarter and Moody’s recording a 0.3% increase to 3.94%.
In private credit, loan origination yields have been falling since 2023, AFME highlights. In Q4 2025 they were recorded at 8.57%, down from a Q2 2023 high of 11.4%.
Leveraged loan origination deal sizes reached a record average high of €477.2 million in 2025, totaling €193.7 billion over the year. However, Q4 issuance was down 30% YoY. Over the quarter, institutional spreads fell from 461.42 bps to 327.82 bps while pro rata spreads went from 750 bps to 274.17 bps.
Default rates were elevated, with Fitch noting an increase from 1.8% to 2.5% on a trailing 12-month basis.
In direct lending, origination was down 19.7% YoY to €24.1 billion, contributing to a yearly total of €103.2 billion. The UK and Ireland were the most active regions over the quarter, with 31.7% of European origination coming from the area.
Default rates increased over the year as a whole, going from 1% to 1.6% by count on a trailing twelve month basis and from 0.4% to 0.9% by volume.
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